FG ‘subsidise electricity cost pending new tariffs in April

The federal government will continue to subsidise the gap in electricity cost to consumers pending the adjustment in tariffs announced by the Nigerian Electricity Regulatory Commission (NERC) on Saturday.

On Saturday, NERC announced a new multi-year tariff order (MYTO) to supersede the previous one issued since 2015.

In its announcement, the electricity sector regulator said the new order was scheduled to come into effect January 1, 2020.

The order involved the review of the electricity tariffs chargeable by the 11 electricity distribution companies (DISCos) for all categories of consumers in the country, except the residential category (R1).

However, following the publication of the order in the media, NERC on Sunday gave a clarification that although January 1, 2020 was given as the effective date for the new order, the government will continue to subsidise electricity consumption cost till April 1 this year.

“The federal government’s updated Power Sector Recovery Programme (PSRP) does not envisage an immediate increase in end-user tariffs until April 1, 2020 and a transition to full cost reflectivity by end of 2021,” the clarification highlighted.

“In the interim, the Federal Government has committed to fund the revenue gap arising from the difference between cost reflective tariffs determined by the Commission and the actual end-user tariffs payable by customers in line with stipulated criteria,” the statement added.

The criteria include an obligation by all the DISCOs to settle in full their market invoices to gas suppliers and other commitments as adjusted and netted off by applicable tariff shortfall; compliance to the minimum remittance threshold spelled out in the MYTO, taking into consideration receivables from ministries, departments and agencies.

The spokesperson of the Association of Nigerian Electricity Distributors (ANED), Sunday Oduntan, last year gave the shortfall in revenue as a result of the federal government’s refusal to implement a cost-reflective tariff regime in the power sector since 2016.

The shortfall is the minimum amount the government will have to pay to subsidise the cost of electricity supply.

Tariffs under latest MYTO order

A review of new tariffs by PREMIUM TIMES showed price increases which ranged between 60 per cent in places like Ikeja, to about 73 per cent in Abuja, and about 78 per cent in Enugu.

For instance, the new tariffs showed that Residential consumers, particularly those categorised as R2, in Ikeja, who have been paying about N13.34 per kilowatt hour (kWh) under the 2015 MYTO will be paying about 59.7 per cent increase.

Similarly, their counterparts in Enugu, who have been paying about N17.42 per kWh since 2015 will be paying about N30.93 kWh, about 77.6 per cent hike under the new dispensation.

Consumers in Abuja and environs who have been paying N27.20 per kWh since 2015, will now be paying N47.09 per kWh, over 73 per cent increase.

Except consumers in the Residential (R1) category, who will continue to pay N4 per kWh, all other categories of consumers, namely commercial, industrial and special, will pay higher tariffs, some as high as over 100 per cent.

The R1 are those categorized as poor under the life-line group consuming about 50 kWh or less.

The R2 consumers are those residing in houses, flats, or multi-storeyed buildings and use single or three phase meters. These consist of the bulk of the consumers spread across the country.

R3 are consumers are those who reside in houses, flats or multi-storeyed buildings, but use low voltage maximum demand load, while their R4 counterparts use high voltage maximum demand load (11|33kV).

Further clarification by NERC

NERC spokesperson, Usman Arabi, in the statement obtained by the News Agency of Nigeria (NAN) in Lagos said the latest “minor review implemented by the Commission was a retrospective adjustment of the tariff regime released in 2015.”

“This is to account for changes in macro-economic indices for the years 2016, 2017 and 2018 thus providing certainty about revenue shortfall that may have arisen due to the differential between tariffs approved by the regulator and actual end-user tariffs.

“The commission, therefore, wishes to notify the general public that no tariff increase has been approved by the Commission vide the order,” he clarified.